Humes Building Contracts Ltd v Charlotte Home (Surrey)

The adjudicator was in breach of the rules of natural justice in having rejected the employer's contention that any sum due to the contractor should be significantly reduced on the ground that the employer had failed to give any notice of intention to withhold payment

The adjudicator rejected the employer's contention that any sum due to the contractor on its interim payment application should be significantly reduced due to defective works and the liquidated damages which it was entitled to claim on the ground that the employer had failed to give any notice of intention to withhold payment. However, the adjudicator did not inform the parties before he came to his decision that he intended to take the point about the absence of a withholding notice. Indeed the contractor had not raised the point during the course of the adjudication. The employer refused to pay the sum awarded by the adjudicator and the contractor brought court proceedings to enforce the decision. The employer opposed enforcement on the ground that the adjudicator was in breach of the rules of natural justice in having rejected its contention because of the absence of a withholding notice. The contractor submitted that whilst the adjudicator's rejection of the employer's contention might have been wrong in law on this ground, it did not amount to a breach of the rules of natural justice.

Judge Gilliland refused to enforce the decision on the grounds that the adjudicator was guilty of a breach of the rules of natural justice. Whether the interests of fairness required an adjudicator to put to the parties for comment a matter which had not been raised by them depended on the circumstances and no hard and fast rule could be laid down. Whilst the adjudicator's mistake in law did not of itself amount to a breach of the rules of natural justice in the light of the approach of the Court of Appeal in Carillion v Devonport Royal Dockyard, what the adjudicator had done was manifestly and seriously unfair to the employer. If the employer was correct in its contention as to the extent of the defective work, the amount of any award in the contractor's favour would have been very significantly reduced. In particular there was nothing to suggest that the employer should have realised that the adjudicator might be of the view that a withholding notice was necessary before he could consider its claim.